photo credit: cambodia4kidsorg
1.Communicate your Leverage Point
Let people know what you can do ‘differently’. Entrepreneurs should talk about their capital efficiency. Probably you are doing some work cheaper than others or you have access to a group of customers – think of any leverage point you have and flaunt it.
2.Communicate through a story
People find stories interesting and exciting. There was this problem and I thought this product would be perfect. Know more about the idea and your product and have a good story with it.
3.Accept that your Startup may have flaws
Every startup has one issue or the other in the early days and accept these issues. Don’t spend time convincing others why your startup is like this or like that. Spend that energy in explaining what your startup may grow up as.
4.Plan Small and Dream Big
In the early days you can’t be extravagant and you need to explain this to be funded properly.
We suggest you read this post at OnStartups for more insight to the topic
Even though I know an idea is likely going to take more cash than the entrepreneur things, I prefer backing people that believe they can do it with little cash and try to do so. As Josh said, learn to fail cheaper
photo credit: woodleywonderworks
Option pool can be described as the amount of a startup’s common stock reserved for employees, directors, advisors, and consultants. The stock reserved is then issued to the aforementioned stakeholders. It is through a written plan a startup pre-authorizes the amount of the company’s common stock which will be issued by the administrator (usually the startup’s board of directors or a committee selected by the board). A startup, for example, can have 5,000,000 shares of common stock but only elect to authorize 2,000,000 shares.
A startup’s original option pool may not likely turn out to be the last option pool the startup creates. The size of the pool should be discussed at each round of funding and financing, since at that time, the startup might need more equity options to attract and motivate future hiring.
The confusing part of an option pool is how the option pool’s non-issued or unissued portion is treated.
We suggest you read this post for a detailed insight into Option Pool Shuffling
Summary: Don’t let your investors determine the size of the option pool for you. Use a hiring plan to justify a small option pool, increase your share price, and increase your effective valuation.
photo credit: woodleywonderworks
Investors and entrepreneurs may not always have the same needs and motivations, hence it’s a common phenomenon that investors might reject your startup idea because it’s not a right fit for them. It is important for both parties to know how to deal with this rejection.
One suggestion here to entrepreneurs is to never ask for referrals. When your pitch is rejected, the worst thing you can do is ask for a referral. It won’t work in a professional business context. The venture capital community is a very close-knit group that has a high amount of trust and reliability in one another, so it is quite irrelevant to ask for a referral. Entrepreneurs should be careful with this.
Just as the entrepreneurs, investors need to know how to deal with a rejection as well. Following “honesty is the best policy” approach will be the best here. Be clear, concise and honest to startups. Entrepreneurs, on the other side of the table should take rejection for what it is, and not push back for a referral.
A note to startup entrepreneurs – don’t take rejection personally ever. And don’t forget to look on the bright side of a rejection; something better is waiting for you always.
For more insight on this matter, we suggest you read this post at ReadWriteWeb
Bijan Sabet suggests. Sabet says that had he not been turned down for his first job application, he may not have found himself where he his today, both professionally with becoming an investor, and personally with meeting his wife.
photo credit: alancleaver_2000
Intel Corp (the world’s largest chip maker) with a group for other 24 venture capital firms has declared that it will invest $3.5 billion in U.S tech startups over the coming two years to accelerate and promote domestic job growth. The investments will mainly focus on information technology and bio-technology (or clean technology).
Intel believes (and the US also) that it faces stiff competition in the areas of education and innovation from India and China. The CEO of Intel argued that the United States should lead the global race for innovation.
Intel has also taken initiatives in the past when it comes to investing or hiring graduates. Google, HP, GE and Dell Inc. also encourage graduate hiring.
A good step taken by Intel for promoting innovation and startups
For more details we suggest you read the Business Week Post here
http://www.businessweek.com/news/2010-02-23/intel-venture-firms-to-invest-3-5-billion-in-u-s-startups.html
Intel takes stakes in companies that have technology that can be used to increase future processor sales.
photo credit: wili_hybrid
Crowd Funding can be described as a trend that aggregates small amounts of money from many people for a certain cause which can range from helping a charity to funding a clothing design. The networking and pooling for funding is usually done through the internet.
Companies have been tapping funds for customer service and product design for quite some time now but tapping the crowd for funds is a bit trickier. However, there is great potential for startup financing through crowdfunding.
An entrepreneur who wants to use crowd funding makes use of online communities to solicit pledges of small amounts of money from individuals (typically not professional financiers).
The biggest problem with crowd funding is that if a small contribution obtained via crowd sourcing is actually an ‘equity investment’ (or even a loan) then crowd funding companies may soon run faulty of security laws. For example: If you raise money from over a certain number of people, you are subject to a full-fledged list of security laws. (Rules vary according to country). Also crowd funding scams can be huge but where money is involved, scammers will come automatically.
So is crowd funding a Web 2.0 twist or the future of online fundraising?
I believe that crowd funding is here to stay and has enormous potential. It is still in its initial phase but it’s going to get better.
On this note I remember an online platform for crowd funding for web and mobile startups was launched recently - GrowVc
For more information we suggest you read this post and an article in businessweek
photo credit: Aidan Jones
Incubators (or business incubators) are programs aimed to accelerate the growth of entrepreneurial companies by providing them with an array of business resources and services. Incubators may vary in the style in which they deliver these services, in the type of clients they serve or the organizational structure they have.
Incubators are especially dedicated to growth and development of start up companies. Research and Technology parks on the other hand support large scale projects that support everything from corporate, government or university labs to very small companies.
A successful incubator I would like to mention here is Y incubator launched by Paul Graham in 2005. It has funded over 60 startups and still continues to inspire many others. The model followed by Y incubator has been imitated widely through out the world and hence there are many incubators around the world offering good services and seed funding to startups.
If you’re a startup founder looking for seed funding, here are a few incubators suggested by ReadWriteWeb: Y Combinator, TechStars, SeedCamp, Summer@Highland, Launch Box, Bootup Labs etc. For more details on this please visit
http://www.readwriteweb.com/archives/guide_to_seed_fund_incubators.php
While Graham may not like it, there are a large number of start up incubators following the model he created with Y Combinator and handing out microinvestments in web startups in return for a small stake.
photo credit: lumaxart
Venture Hacks recently launched a new project aiming to bring startups and angel investors closer.
Venture hacks launched AngelList which is a basic directory of around 80 established angel investors including their contact info and key information like what they’re looking for in a startup etc. The members of AngelList will receive weekly updates from Startuplist (the second project launched by Venture Hacks).
StartupList will be a great boon for all startups looking for angel investors. So if you’re a startup looking for early investment and you have no idea how to get to potential investors then this project is definitely for you. To get on the list you need to apply here.
Venture Hacks will send weekly emails featuring three startup pitches to some of Silicon Valley’s most respected angel investors.
Kudos to Venture Hacks. Great effort and all the best
photo credit: liewcf
The post is a gist of the speech by Jay Jamison discussed in his blog leaving the flock
At an early stage all startups are usually advised to focus on building a great product/service and getting an audience. And then revenue will flow automatically. How right is this concept? Is it advisable not to think about the revenue too early in the life of a startup?
It is extremely important to focus on your idea and building something people want, but at the same time thinking about the revenue model (at least a bit) at an early stage is recommended as well. Don’t divert your attention from the main goal since a great product is the lifeline of a startup. But it is also advisable to at least have a revenue model which you can always change it later on. Don’t rush into monetizing though, monetize when it makes sense.
A startup can have various kinds of business models, the popular ones being;
Figure it Out Later/ Ads (Google, Twitter)
Market Maker (Paypal, Ebay)
Freemium or Subscription (Animoto, Salesforce.com)
Virtual Goods (Facebook applications)
Price Per Use or Copy (MS Office)
Another important suggestion for startups is – know your industry model inside out. It is very important to analyze the industry. Ask tons of questions and connect with customers and market. Build a belief that your revenue model will work in the industry model.
I’ll talk about my thoughts on types of revenue models, a sort of revenue model 101. Nothing too revolutionary here, but hopefully a useful primer if you’ve not thought through a business model before
photo credit: billaday
The Wikipedia definition of a Term sheet – a bullet-point document outlining the material terms and conditions of a business agreement
It can be described as a non- binding document (like a Letter of Intent) which records two or more parties’ intentions to enter into a future agreement.
Venture Capitalists (VCs) backing out of a term sheet agreement for any reason can be very harmful to a company’s reputation.
If the VC has agreed on the conditions of a term sheet earlier, and then for some reason has backed out, then it’s not his fault. The term sheet by no means is legally binding upon any party involved in the contract.
VCs generally have valid reasons before they decide to back out from investing. Any void term sheet can be devastating for a startup company. If one VC backs out of an offer, then other ‘potential investors’ will look at a startup suspiciously and raising investment will become difficult.
Just remember – be diligent, don’t over promise and NEVER forget that a term sheet is not legally binding.
Read the following articles for a greater insight on the matter:
http://www.readwriteweb.com/start/2010/02/how-your-term-sheet-affects-yo.php
http://cdixon.org/2010/02/03/backing-out-of-a-term-sheet/
It was at Bessemer that I learned you never back out on a term sheet except in cases of fraud etc. I never saw them back out on one nor have I heard of them doing so
photo credit: Jeff Belmonte
A startup’s model/product usually undergoes a significant change from the point of founding to the point of funding. How the capital flows into a startup is very critical and quite difficult to manage.
Startups can either have too much capital, too little capital, or poorly applied capital – and execution of the startup model in presence of any condition mentioned above can be harmful to the business. Capital investment of a startup determines two crucial things; health of a startup and more importantly, the relationship between a startup and its investors. The concepts of capital discipline and slow capital provide a framework for managing this relationship.
Capital Discipline – to raise and use capital wisely. Take a lean oriented & customer – focused approach. A minimum-product viable strategy will be ideal to get money and feedback from early adopters. Raise ‘just enough’ capital and try being independent from the time framework since sometimes it may takes years to achieve what your startup model actually aimed for.
Slow Capital – A sense of urgency is important for capital investment but don’t rush to conclusions. This point is particularly beneficial for investors as well-thought investment decisions are precisely what they’re looking for.
Start with small investments and grow with the company.
Capital should be poured into a startup depending on its stage of development.
Capital should be consistent, transparent and disciplined. This is the key for a startup to be successful and to get off on the right foot.
We suggest you read the article at GigaOM for more detail
And that requires a new sort of relationship between startup and investor, one in which the historic friction associated with bringing capital into a startup over time is reduced or eliminated.
